Pre-Approved mortgages
A pre-approved mortgage allows you to start your home search, based on
qualifying for a mortgage in advance. You will be given the best rates,
and the rate will be guaranteed for up to 120 days.
Conventional mortgages
If you have 30 percent of the purchase price or more, as a down payment,
you can apply and be eligible for a conventional mortgage. Depending on
the type of property or location, you may be required to obtain Canada
Mortgage and Housing Corporation (CMHC) insurance, or Genworth Financial
Canada (GE Canada) insurance.
High ratio mortgages
If you have 5 to 30 percent of the purchase price as a down payment, you
will need to apply for a high-ratio mortgage. A high ratio mortgage
needs to be insured through Canada Mortgage and Housing Corporation
(CMHC), or Genworth Financial Canada (GE Canada). This type of mortgage
insurance allows you to qualify for a high-ratio mortgage. An insurance
premium is charged when you receive your funds. The insurance amount can
be included in the mortgage payments or paid separately. The premium
payment is calculated by multiplying the amount of the mortgage with the
percentage of the total purchase price.
Open mortgages
An open mortgage is a type of mortgage that allows you to pay back part
or the entire mortgage without penalties. These mortgages have shorter
terms, usually six months to one year. They come with higher interest
rates than closed mortgages.
Variable mortgages
A variable or adjustable rate mortgage payment will change as the prime
rate interest changes. The calculated principal and interest rate will
change. When interest rates drop, more of your payment will go to the
principal. When interest rates rise, the opposite will occur. Some
variable rate mortgages allow you to pay off part of your mortgage or
all of it, without penalties, or some will charge and penalty. Interest
rates are compounded monthly on most variable rate mortgages.
Capped rate mortgages
A capped rate mortgage is a variable rate mortgage which has been capped
at a certain interest rate. Your lender sets the rate and if interest
rates rise higher than your capped rate, you will not be affected. These
mortgages are not portable and have a penalty for full payment.
Closed mortgages
Traditionally, a closed mortgage meant that you could not pay the
mortgage in full or partial payments without a penalty, except for a
sale of the property. There have been changes to this type of mortgage
and there are ways to pay it off quicker.
Fixed Rate mortgages
A fixed rate mortgage means that your interest rate is locked in for a
period of time which could be from three months to 30 years. The rates
are also lower than an open mortgage. If mortgage rates are predicted to
rise, this is often the best choice. Lenders have different options
available for prepayment of a mortgage, although many impose penalties,
sometimes a hefty payment.
Convertible mortgages
A fixed rate mortgage for a short six month or one year term can be
converted to a longer term without penalty as long as you stay with the
same lender.
Bridge Financing
Bridge financing is a short term loan that is provided when you have a
gap to cover between the sale of one property and the acquisition of
another and the purchased property closes before the sold home. You will
have two mortgages to carry. A bridge loan covers this period.
Reverse mortgages
A reverse mortgage is available through the Canadian Home Income Plan.
This type of mortgage allows a homeowner to convert the equity in their
home into cash. There is no need to sell the property and there are no
monthly payments. A homeowner applying for this type of mortgage must be
62 years of age, or older and have a significant amount of equity in
the property. This mortgage is available in Ontario and British
Columbia. The older a person is, the more that they can borrow. You can
borrow between 10 and 40 percent of the appraised value. A homeowner
will retain ownership and can still reside in the home. When the
homeowner dies, the property is sold and the loan and interest are
repaid. Interest is continually accruing on this type of mortgage and
there many not be much money left from the sale of the property after
this loan is paid off.
